Tata Steel Pradip

8/6/2019 Tata Steel Pradip

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A

PROJECT REPORT

ON

Working Capital Management of Tata Steel. In partial fulfillment of the Requirement of

MBA Batch (2010-2012) two year full time Program

UNDRER THE GUIDANCE OF

Company Guide : Faculty Guide:

Name- Mr. I . Roy Name- Mrs. ABHA GRAWER

Designation: Head (Decision Support), F & A Designation: Professor

Name of the company: TATA STEELLIMITED.

Submitted by:

Student Name:- PRADIP KUMAR SHARMA

PROJECT DURATION: 1st June 2011- 20th July 2011


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Working Capital Management-Comparative Analysis

D E LCLARATION

I , PRADIP KUMAR SHARMA the undersigned, a student of NEW DELHI

INSTITUTION OF MANAGEMENT,OKHLA,NEW DELHI declare that project report

titled working capital management at TATA STEEL submitted in partial

fullfillment of the requirement for the summer internship project during the

Post graduate degree awarded by NEW DELHI INSTITUTION OF

MANAGEMENT,NEW DELHI. The project duration was from 1st June 2011 to 20th

July 2011.

This is my original work and has not been submitted as part of another degree

or diploma of other business school or university.

The findings and conclusions of this report are based on my personal study and

experience, during the tenure of my summer internship.

Name:PRADIP KUMAR SHARMA

Date: 20th July 2011

Place: TATA STEEL (Jamshedpur)

________________________

Signature:

. NEW DELHI INSTITUTION OF MANAGEMENT, NEW DELHI.


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A CKNOWLEDGEMENT

I would like to extend my gratitude to Mr.I.ROY(Head Financial Accounts) for

giving me opportunity to work in such an important sphere and sharing his

vision and experience. Mr.I.AHMAD for his continuous support and guidance;

Mr. GAUTAM GHOSE(Manager, TataManagement Development Centre

(TMDC) for providing me the opportunity to learn and complete my summerinternship in this esteemed organization.

I also take the opportunity to thanks Prof.ABHA GRAWER (NEW DELHI

INSTITUTION OF MANAGEMENT,OKHLA,NEW DELHI)for her guidance and

invaluable inputs in the development of the project , and in terms of managing

the real time issues that we faced in the corporate world .

Last but not the least I would like to extend my thanks to all the employees at

finance department, my family and friends for their co operation , valuable

information and feedback during my project .

NEW DELHI INSTITUTION

OF MANAGEMANT

OKHLA,NEW DELHI.



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P REFACE

It has been a fruitful summer project. The summer training has been a greater

into the corporate culture and has enriched my knowledge about conducting

my business. Having spent some mature individual ,prepared to take on thepressure of the business world.

This report added immensely to my knowledge how a corporate world actually

work as a team to achieve its goals ,the spirit and the enthusiasm of the

leading ahead from its competitors and the above all true and fair view as the

main motto and the most of all various techniques used to maximize efficiency

and increase production.

I will be grateful to TATA STEEL for giving me the opportunity to be part of

this repudiated organization and help me throughout in understanding some of

the important facts concerned with this prestigious institution.



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Table of content

Sl. No. TITLE PAGE No.

1) OBJECTIVE OF THE PROJECT 6

2) STEEL INDUSTRY OVERVIEW 7-11

3) SWOT ANALYSIS 12

4) HISTORY OF TATA STEEL 13-16

5) MAJOR BRANDS OF TATA AND ITS JV

/SUBSIDIARY CO.

17-20

6) COMPANY PROFILE 21-23

a.

b.

c.

d.

e.

Management Of TATA STEEL

Product Portfolio

Awards & Certificate

TATA STEEL Business Objective

Finance & Accounts Department.

24

25-27

28-29

30

31-32

7) RESEARCH METHODOLOGY 33-34

a.

b.

Scope of the project

Research Design

8) WORKING CAPITAL DEFINITION, CONCEPT. 35-36

9) DATA ANALYSIS OF TATA STEEL LIMITED 37-52

a.

b.

c.

Net Working Capital

Percentage Change In Working Capital

Financial Ratio



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d. Operating Cycle

10) DATA ANALYSIS OF JSW (JINDAL STEEL) 53-65

a.

b.

c.

d.

Net Working Capital


Financial Ratio

Operating Cycle

11) DATA ANALYSIS OF SAIL (STEEL AUTHORITY

OF INDIA)

66-78

a.

b.

c.

d.

Net Working Capital


Financial Ratio

Operating Cycle

12) COMPARATIVE ANALYSIS 79-89

a.

b.

Operating Cycle

Financial Ratio

13) CONCLUSION & RECOMMENDATION 90-92

14) LIMITATION 93

15) BIBLIOGRAPHY 94

OBJECTIVE OF THE PROJECT:

1) To understand the concept of WORKING CAPITAL MANAGEMENT

2) To understand the techniques and processes ofWORKING CAPITAL MANAGEMANTat TATA STEEL.



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3) To analyze the effectiveness and efficiency of the existing working capital Control system.

4) To compare the working capital position ofTATA STEEL with other players in the market.

5) To find out areas of weakness, if any.



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S T E E LI N D U S T R YP R O F I L E

Rank Country 2010 2009 Change

1 China 626,654 573,567 9.26%

2 Japan 109,600 87,534 25.21%



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3 U.S. 80,594 58,196 38.49%

4 Russia 67,021 60,011 11.68%

5 India 66,848 62,838 6.38%

6 South Korea 58,453 48,572 20.34%

7 Germany 43,815 32,670 34.11%

8 Ukraine 33,559 29,855 12.41%

9 Brazil 32,820 26,507 23.82%

10 Turkey 29,002 25,304 14.61%

(Figures in Thousand Metric Tons)

As a result of the strong growth in China in sharp contrast to the decline in major parts of the globe,

the list of the top ten steel producing companies during 2009 was dominated by Chinese companies.

Rank Company Country 2010

Crude steel

output per year

in MT .

1 Arcelor Mittal Luxemburg 1,03,300,000



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2 Nippon Steel Japan 37,500,000

3 Bao Steel China 35,400,000

4 POSCO South Korea 34,700,000

5 Hebei Iron & Steel

Group

China 33,300,000

6 JFE Holdings Japan 33,000,000

7 Wuhan Steel

(WISCO)

China 27,700,000

8 Tata Steel

(TISCO)

India 24,400,000

9 Jaingsu Shagong Group China 23,300,000

10 US Steel USA 23,200,000

(Figures in million metric tonnes)

Steel Industry in India

The efforts to develop the steel industry in India started during the first five year plan but the real

developments started happening from 1980s onwards. Although the Indian steel industry increased

its production, in the nineties India imported huge quantity of steel to meet the growing demand ofsteel in the country. This scenario was totally changed in 2004 when India stood at the ninth

position in terms of crude steel production in the whole world and in 2006, India was at the seventh

place among the crude steel producing companies.

There are different factors that are responsible for this development. Firstly,

the Indian government has taken some reformatory steps that have helped the Indian steel industry

to grow at a good pace. The Indian government has set a target to increase the crude steel

production and till 2019-20, the Indian steel industry is expected to produce nearly 110 million

tones of crude steel.

The production of flat products and long products of major Indian companies is estimated to have

grown by around 12% and 8% respectively during the financial year 2009-10 when compared with

the previous financial year. While the long products exports were almost at the same level as that in

the last year, flat products exports dipped by around 30% on account of the global slowdown. The

imports on the other hand were higher for both flat products as well as long products by around

17% and 35% respectively as the flat products and long products segments experienced around

23% and 9% increase in steel consumption. In line with the fiscal stimulus package announced in

the country, the Government of India removed export duty on all steel items, reintroduced import



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duty of 5% on steel, restored DEPB benefits, reduced excise duty to 8% for major part of the year,

placed import of hot rolled coils on the restricted list thus making them available to direct users

only and withdrew countervailing duty on import of Thermo-Mechanically Treated (TMT) bars and

structural. In order to ensure adequacy of availability of iron ore in domestic market, export duty on

iron ore lumps has been increased from 5% to 10% and a 5% export duty has been imposed on iron

ore fines to regulate the exports. The steel prices during the financial year 2009-10 have increased

from the level prevailing in the quarter ended March 2009 driven primarily by the increase in the

prices of input raw materials during the same period.

UK and European Steel Industry

In the EU, the apparent steel consumption dropped by around 35% during 2009. There was a

decline of around 45% during the first half of 2009 driven by extremely weak activity in the steel

using sectors and continuing sharp de-stocking. With the unprecedented drop in the activity levels,

the production during 2009 reduced by around 20% over 2008 with sharp reduction experienced

particularly during the first half of the year. The market downturn began to level out in the second

half of the year as business conditions began to improve slowly, supported by government stimulus

measures and improvements in international trade. With imports dropping by around 47% as

compared to 2008, stable and low level of

stocks through the supply chain and reduced levels of domestic steel business, the EU steel market

supply and demand became much better balanced by the quarter ending December 2009. The

exports

during 2009 are estimated to have reduced by around 9% and the EU was a net exporter in long

products.

South East Asian Steel Industry

Preliminary assessment suggests that the steel consumption in the Association of South East Asian

Nations (ASEAN) picked up significantly in the second half of 2009. However, the increase was

not sufficient to offset the sharp drop in the consumption in the first half of the year. As a result, the

ASEAN apparent steel demand for 2009 is around 42.3 million tones which is 8% lower than the

last year.



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Production of flat products and long products during the year was stable at around 24.4 million

tones. However imports and exports dropped significantly. Total imports reduced from 30 million

tons in 2008 to 19.7 million tones in 2009 and exports dropped by 50% from 8 million tons in 2008

to 4 million tons in 2009.

Consumption of Long Products recorded at 20.1 million tons in 2009, reduced by 4% as compared

to 2008. The production declined to 16.4 million tons while exports dropped to 5.9 million tones.

The demand for long products seemed to pick up fast and at 11.8 million tones in the second half of

2009, was close to the pre-crisis levels resulting in domestic producers benefitting from the demand

growth.

S WOT ANALYSIS :

STRENGTH:



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Strong brand name like TataSteel &

Corus Indian operation capable of

meeting

its own requirement Strong supply chain for raw

materialleading sales &

distribution Low cost, high skilled labour.

WEAKNESS:

Low R & DInvestment

Unscientific mining method Technologically backward Low productivity

OPPURTUNITY:

Unexplored rural markets Growing domestic market

Growing global market Carbon trade High investment in

infrastructuresector

THREATS:

Major player entering Indianmarket

China set to become a netexporter

High duties and taxes fromthe

government

Environmental concerns & laws Global slowdown



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H ISTORY OF TATA STEEL

Formerly known as Tata Iron and Steel Ltd. (TISCO), TATA

STEEL was registered in Bombay( now Mumbai) on August

26, 1907.It had an initial capacity of 1,60,000 tones of ingot

steel,70,000 tones of rails, beams and shapes and 20,000

tones of bars, hoops and rods. It also had a power house,auxiliary facilities and a laboratory. In 1917, the company

increased its steel Capacity to 5,00,000 tonnes and

introduced the Modern Duplex process of making steel. Since the company has

continued to add new units and increase capacity.

In the 1980s the company undertook in various phases an ambitious

Modernization Programme.The first phase, betwee1981and1985, involved a

total project cost of Rs 223 crores. This phase, among others saw the installation

of two 130 tonne LD converters, two 250 tonne a day Oxygen Plants, a bar forgingmachine, two vertical twin shaft lime kilns and a tar-dolo brick plant. Significantly,

a six-strand billet caster and a 130-tonne vacuum arc-refining unit were installed

that too in the integrated steel plant.

The second phase (1985-1992) involved a project cost ofRs780crores.

It saw for the first time in India coal injection in blast furnace and coke oven

battery with 54 ovens using stamp-charging technology. A 0.3 MTPA 9million

tonne per annum) wire rod mill, a 2.5mtpa sinter plant, a bedding and blending

plant and a waste recycling plant of 1 MTPA were installed.

The company recently commissioned its 1.2MT (million tone) capacity

Cold rolling Mill Complex .At a project cost of Rs 1600 crores. This Four-Phase

Modernization Programmed has enabled Tata steel to be equipped with the most

modern steelmaking facilities in the world. As of today The Tata steel facility has

a Hot Metal Capacity of 3.8MTPA, corresponding to a saleable steel Capacity of

3.4 MTPA.

In 2005 Tata Steel acquired Singapore based steel company Nat Steel

by subscribing to 100per cent equity of its subsidiary, NatSteel Asia. Tata Steel israpidly expanding capacity and plans to produce 15MT of steel annually by


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2010.It acquired Singapores NatSteel in August 2004. This has added 2 MT to its

capacity. It is close to completing a 1 MT capacity expansion in its Jamshedpur

plant. The expansion is scheduled to be completed by September 2005. In

addition a 6 MT green field plant is to be developed in Kalinganagar, Orissa, India

(to be commissioned in 2010) and another 2.4 MT capacity expansion will be

taken up in Jamshedpur. After partnership with Corus Group, the combined entity

will be the 6th largest steel producer and the 2nd most geographically diversified

steel company in the World.

F OUNDERS OF TATA STEEL

Jamsedji Nusserwanji Tata (1839 1904)He was a visionary behind Tata Steel .He realized that Indias real

freedom depended upon its self-sufficiency in scientific knowledge,

power and steel, thus devoted the major part of his life, and his

fortune to three great enterprises-The Indiani nstitute of Science

at Bangalore, the Hydro-electric schemes and the Iron & Steel

Works at Jamshedpur .He envisaged and conceived a steel town

to the very last detail, later to be named as Jamshedpur.

J.N. Tata had exhorted to his sons to pursue and develop his lifes work ; his elder

son, Sir Dorabji Tata(1859-1933) carried out the bequest with scrupulous zeal and

distinction .Thus , even though it was Jamshedji Tata who had envisioned the

mammoth projects, it was in fact Dorabji Tata who actually brought the ventures

to existence and fruition. He was the first chairman of the gigantic Tata

enterprises.

It was in 1907 that the village of Sakchi was discovered at the confluence of two

rivers, Subarnarekha and Kharkhai and the railways station of kalimati .The Tata

Iron and Steel Company was floated.

Sir Dorabji Tata (1859 1933)

Sir Dorabji Tata(1859-1933), carried out the bequest

with scrupulous zeal and distinction.

Thus , even though it was Jamshedji Tata who had

envisioned the mammoth projects, it was in fact Dorabji



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Tata who actually brought the ventures to existence and fruition. He was the first

chairman of the gigantic Tata enterprises.

Bharat Ratna Jehangir Ratanji Dadabhai Tata (1904 1993)

J.R.D.Tata has been one of the greatest builders and

personalities of modern India in the twentieth century.

He assumed Chairmanship of Tata Steel at the young age of

34, but his charismatic, disciplined and forward looking

leadership over the next 50 years led the Tata Group to new

height of achievement, expansion and modernization.

His style of management was to pick the best person for the

job at

hand and let him have the latitude to carry out the job. He

was never interested for Micro- Management. It was he who zeroed in on Sumant

Moolgaokar, the engineering genius who successfully steered our company for

many years. He was a visionary whose thinking was far ahead of his time, which

helped Tata Group launching its own Airlines ,now known as as Air India. He was

awarded the countrys highest civilian honour, The Bharat Ratna in 1992.

RATAN NAVAL TATA

Ratan Navel Tata was born on December 28, 1937, in Surat. He is thepresent Chairman of Tata Group, Indias largest conglomerate founded by

jamshedji Tata and consolidated and expanded by later generation of his family.

He is one of the most well known and respected industrialists in India.Tata was born into wealthy and famous family of Mumbai. His childhood was

troubled as his parents separated in the mid 1940s, when he was about seven

and his younger brother was five. His mother moved out and both he and his

brother were raised by his grandmother Lady Navarjbai.

Ratan Tata completed his degree in architecture with structural engineering from

Cornell University in 1962, and the Advance management Program from Harvard

Business School in 1975. He joined the Tata Group in December 1962 on the

advice of JRD Tata. He was first sent to Jamshedpur to work at Tata steel. He

worked on the floor with the other blue collar employees, shoveling limestone



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and handling the blast furnaces. He was appointed the Director In Charge of The

National Radio & Electronics Company Limited (Nelco) in 1971 and was successful

in turning Nelco around.

IN 1981, he became the chairmen of Tata industries and was instrumental in

ushering in a wide array of reforms. It was under his stewardship that Tata

consultancy services went public and Tata Motors was listed in the New Yorkstock Exchange.

On the occasion of Indias 58th Republic day on 26 January, 2000, Ratan Tata was

honoured with the padma Bhushan, the third highest decoration that might be

awarded to a civilian.

His recent achievements have been the acquisition of Corus Group, and Anglo-

Dutch steel and aluminium producer. This acquisition has made Tata steel the

fifth largest producer of steel in the world.

TATA STEEL: AN ORGANISATIONAL PROFILE

Established in 1907, Tata Steel is Asia's first and India's largest private sector

steel company. Tata Steel is among the lowest cost producers of steel in the

world and one of the few select steel companies in the world that is EVA+

(Economic Value Added).

Tata Steel has operations in 10 countries and maintains a strategicpresence in select Geographics through exports.

GROWTH AND GLOBALISATION.

Jamshedpur, India-

5 million tones per annum, slated to reach 7 MTPA in 2008&10 MTPA by 2011.

Partnership with Corus

On partnership with Corus group, the combined

entity will be the 6th largest steel producer and

the 2nd most geographically diversified steel

company in the world.

Nat steel Asia Singapore

2 million tonnes ;Singapore ,China,Vietnam,Thailand and three other South East

Asian countries.

Tata Steel, Thailand-

1.7 million tonnes Limestone mining in Thailand. Low ash coal in Australia.

al steel captive raw material resources in India give it a competitive advantage.

Other Projects:

India

http://www.tatasteel.com/careers/profile.htm#TOP


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1.2 MTPA Metcoke project in West Bengal Deep sea port in Dhamra, Orissa

Titanium Dioxide project in Tamil Nadu Joint Venture with BlueScope Steel for

metallic coating and painting steel unit

Overseas:

Development of a source of low ash coal from Queensland, AustraliaFerro Chrome production in Richards Bay, South Africa

SOME MAJOR BRANDS :

Tata Steelium:This is worlds first branded Cold Rolled Steel product.

Tata Shaktee:Galvanized corrugated sheets.

Tata Tiscon: Re-bars

Tata Pipes:It is the most valued brand in plumbing segment.

Tata Bearings:It has made deep inroads in the highly competitive auto market.

Tata Wiron:It services requirements in a wide gamut of industriesincluding automotive, agriculture, fencing and power.



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Subsidiary / Associates / JVs

The Tinplate Company of India Ltd:

35% market share in industry.

Tayo Rolls Ltd:

Country's leading roll manufacturer and supplier

Tata Sponge Iron Ltd:Has an installed capacity of 240,000 tonnes

Tata Metalliks Ltd:Among the top wealth creators in the country.

Tata Pigments Ltd:Produces synthetic iron oxide pigments

Jamshedpur Injection Powder Ltd:Produces 15,000 tonnes of desulphurising compounds

per annum.

TM International Logistics Limited:

Services include material handling and port operations.

Indian Steel and Wire Products:Comprises a wire unit and a steel rolling manufacturing unit



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Metal junction.com:Provides e-business services and solutions toIndian Industry.

Dhamra Port:Deep drafted port project, a 50:50 JV betweenTata Steel and L&T.

TRF Ltd:An engineered-to-order equipment and systems provider.

Jamshedpur Utility and Service Company :

The country's first municipal and civic services enterprise.

Tata BlueScope :Metallic coating and painting facility.

ASSOCIATES & SUBSIDIARIES- Overseas

Lanka Special Steel Limited :A wholly owned subsidiary it is the only unit inSri Lanka manufacturing galvanized wires

Sila Eastern Company Limited:

A 49% joint venture to undertake development of limestonemines in Thailand.

NatSteel Asia Singapore:Presence in six countries in S E Asia andChina, mainly long products

Millennium Steel, Thailand: Long products rolling.



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Tata NYK:A 50:50 JV for shipping dry, bulk and break bulk cargo.

Corus:Now a part of Tata Steel Group. It manufacturesprocesses and distributes metal products as well as providesdesign, technology and consultancy services.

COMPANY PROFILE



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An overview of the company

TATA Steel has been ranked at the top of the Nielsens corporate image monitor study followed by

TATA Motors.

The worlds most admirable companies 2011, published by Fortune Magazine, ranks TATA steel on

6th position in metal industry category.

Tata Steel, formerly known as TISCO (Tata Iron and Steel Company limited), is the worlds seventh

largest steel company, with an annual crude steel capacity of 30 Million Tones Per Annum (MTPA). It

is the second largest private sector steel company in India in terms of domestic production. Ranked

315th on Fortune Global 500, it is based in Jamshedpur, Jharkhand, India.

It is part of Tata Group of companies in private sector with consolidated turnover of Rs.102,393 croresduring the year ended March 31st, 2010. Its main plant is located at Jamshedpur in Jharkhand. With its

acquisition of the Corus, Nat Steel and Millennium Steel it has become a multinational company with

operations in various countries. Tata Steel has a balanced global presence in over 50 developed

European and fast growing Asian markets, with manufacturing units in 26 countries. It is the worlds

second most geographically diversified steel producer. Also it is the worlds lowest cost producer of

steel with shareholder base of 800,000 people and an employee strength over 81,000 across 5

continents.

The registered office of Tata Steel is in Mumbai. The company is listed on Bombay Stock Exchange

(BSE) and National Stock Exchange (NSE). Tata Steel is backed by 100 glorious years of experiencein steel making with its establishment in 1907.

Performance after global economic downturn

Following two years of the worst global economic downturn, The growth rates in the economies of the

developed world are still extremely moderate, while countries in the developing world have registered

high levels of economic growth and some have become new centres of global capacity, demand and

control over natural resources. In 2025, it is forecast that the BRIC countries will have 42% of the

global population, will consume 60% of the global production and will have 70% of the global GDP.



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The steel industry has also been impacted by these global shifts. The requirement of steel is growing in

Asia, where downstream user industries are experiencing high demand, whereas the markets for steel

in the United Kingdom and Continental Europe have remained depressed.

Through these difficult times, Tata Steel has struggled to

adhere to its long-term strategies, both in India and overseas.

There has nevertheless been need to re-schedule and re-

prioritise investment strategies in consonance with market

conditions during this period. In India, the Company has

given top priority to the 2.9 million tone expansion

programme at its Jamshedpur Works and its major

greenfield 6 million tonne integrated steel plant in Orissa.

Tata Steel Asia has steelmaking and finishing facilities in

various Asian countries (including India) aggregating 10.5

million tonnes. Equal importance has been given to rawmaterial security through the acquisition of iron ore and coal

resources overseas to feed its UK and European plants,

while rationalising capacities to make them viable in this

period of slack demand.

While Tata Steels Indian operations have remained

profitable, albeit at a lower level than the previous year, Tata Steels European operations remained

underutilised and hence unprofitable. However, with the rationalisation, the European operations have

become

EBITDA positive for the last two quarters of 2009-10. The benefits of the rationalization will of

course be more evident in 2010-11.

In the coming years, Tata Steel expects to emerge as a global steel producer with a total annual output

of between 40-50 million tonnes, with major manufacturing plants in India, several countries in Asia,

the UK and Continental Europe, supported by integrated mining operations in several geographies.


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MANAGEMENT OF TATA STEEL

Board of Directors :

Mr. Ratan N. Tata Chairman

Mr. B. Muthuraman Vice Chairman

Dr. Karl-Ulrich Koehler Not Independent, Non-Executive Director

Mr. Nusli N. Wadia Company Director

Mr. Iahaat Hussain Board Member

Mr. Subodh Bhargava Board Member

Mr. Jacobus Schraven Non-Executive Independent Director

Dr. Jamshed J. Irani Board Member

Mr. Andrew Robb Non-Executive Independent Director

Mr. S. M. Palia Company Director

Mr. Suresh Krishna Financial Institutions Nominee

Mr. Kirby Adams Managing Director & CEO, Tata Steel Europe

Mr. H.M. Nerurkar Managing Director, Tata Steel Limited



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PRODUCT PORTFOLIO :

Long products:

Wire rod mill.

Bar mill.

Merchant mill.

Flat products:

Hot strip mill.

cold rolling mill

Over the years, the Tata Steel Group has placed a continuous emphasis on improving processes, with a

view to consistently increasing efficiencies, enhancing quality and thereby achieving better

performance benchmarks in all areas. The Groups brand building endeavours have always been

directed at building assurance, reliability and value creation for products in every segment.



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Construction

Designing solutions to serve all sectors including residential, non-residential and infrastructure,

including applications such as structural steelwork and building envelopes (cladding and roofing).

Automotive

Body-in-white, closures, chassis and suspension, seating and interior, power train wheels and tyre bead

wire.

Aerospace

Landing gear, engine and rotor shafts, engine fan casings and blades, structural pylons, slat and flap

tracks. High integrity gear steels for planes, helicopters and motor sport applications.

Consumer GoodsDomestic appliances, lighting, furniture and office equipment, racking and shelving, battery cases,

bake-ware, enamel-coated applications, decorative pre-finished metals plus many others.

Materials Handling

Construction and earth-moving, forklift trucks, mining (e.g. roof supports, drills, crushers, screeners

and conveyors), cranes, trailers, forestry equipment and agricultural equipment.

Energy and Power

Submerged arc-welded pipe for the global oil and gas industry, plate for use in wind turbines,structural systems for the solar power industry, plus a range of structural, electrical and specialty

engineering steels used in power generation and transmission.

Rail



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Rails for high-speed lines, conventional and heavy loaded tracks, special rails for metro and tramways,

as well as for switches and crossings. Steel sleepers and track accessories, modular platforms and

tuned dampers for noise reduction.

Engineering :

General Engineering: Tata Steel manufactures a range of steel products, encompassing hot rolled and

cold rolled sheets, wire rod and wire, sections, plate,

bearings and tubes, which serve a multitude of small

engineering companies in Europe, South Asia and South

East Asia.

Agricultural Tools and Implements: Tata Steel

manufactures a range of high quality agricultural

implements making it the first choice in Indias rural

markets. Its wire products find their way into farming, poultry and fencing applications.

Engineering Services, Plant and Equipment: A multi-

disciplinary engineering approach for the design,

manufacture and supply of high precision equipment is

offered to various industry sectors. Services range from

routine testing, erection and commissioning to full

business consulting.

Shipbuilding

Wide range of vessels including cruise liners, off shore

support vessels, ferries, container ships and aircraft

carriers.

Packaging:

Consumer: Light metal packaging for food and beverages cans as well as for paint and aerosols.

Industrial: Steel for drums, industrial bulk containers and gas bottles .

Security and Defense:

Blast protection structures, blast containment structures, physical perimeter security applications,

redeployable vehicle barriers, bollards, walls and security solution designs.

AWARDS, RECOGNITIONS AND CERTIFICATIONS

Corporate Awards

The rating of being one of the worlds top ten Most Admired Companies by FORTUNE

Magazine and the Hay Group in the Industry-Metal category.

The Economic Times Company of the Year Award.

The Best Establishment Award by the President of India, Mrs. Pratibha Devi Singh Patil.



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The Superbrand Award to Tata Tiscon.

Company with Highest Corporate Image by Nielsen

.

Awards for Excellence in Knowledge

The Most Admired Knowledge Enterprise (MAKE) Asia Award 2009 for the sixth time.

The Fifth BML Munjal Award for Excellence in Learning & Development.

Awards for

Excellence in

Corporate SocialResponsibility

(CSR)

The Golden

Peacock Global Award.

The Significant Achievement in Sustainability certification from CII-ITC.

The TERI CSR Award.

The UKTI India Business Award.

The Times of India CSR Award.

The Ashtray Khel Protsahan Puraskar.

The Ispat Paryavaran Puraskar Special Award.

The Xiamen City Top Employers Award to NatSteel Xiamen for the second time.

The Outstanding Award for Employee Relations & Welfare 2009 to Siam Industrial Wires

(SIW), Thailand.

The Good Governance for Environment in the Factory and Enterprise Award to SIW.

The Corporate Social Responsibility Department of Industrial Work Award to SIW.

The Green Star Award from the Industrial Estate Authority of Thailand (IEAT) to Siam

Construction Steel Company (SCSC).

Subsidiaries:

1) Tata Steel Europe (TSE)

2) Tata Steel Thailand (TSTH)

3) NatSteel Holdings



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Expansion Projects:

1) Orissa Project

2) Chhattisgarh Project

Raw Material Projects:

1) Benga Coal Project, Mozambique

2) Coal Mining Project in Australia (CDJV)

3) Direct Shipping Ore Project in Canada (New Millennium Capital Corp)

4) Ivory Cost Project

5) Limestone Project in Oman

Mergers and Joint Ventures:

As a part of business restructuring exercise, Tata Steel merged HooghlyMet Coke and

Power Company Ltd. (HMPCL) with itself with effect from 1st April, 2009.

The Dhamra Port Company Limited

A 50:50 joint venture of Tata Steel Limited and Larsen & Toubro, is developing a deep-draught port

under a concession agreement awarded by the Government of Orissa on Build, Own, Operate, Share

and Transfer (BOOST) basis.

As part of the drive to secure raw material sources for domestic operations, Tata Steel formed a 50:50

Joint Venture company, S&T Mining Co. with Steel Authority of India Limited (SAIL) in September,2008.

To cater to the raw materials requirement of increasing steel demand and other mineral based

industries, Tata Steel has entered into an agreement with MMTC Limited, a Central Government

undertaking in October 2009 to establish a joint venture company for acquiring, developing and

operating mines and processing of minerals and metals.



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Consistent with its long-term strategy to expand its steel capacity in India along with access to

enhanced resources, Tata Steel has signed a Memorandum of Understanding (MoU) with NMDC for

exploring possibilities of entering into joint ventures for the purpose of acquisition, exploration and

development of mines, extraction and processing of minerals, setting up integrated steel plants and any

other businesses of mutual interest.

TATA STEEL - BUSINESS OBJECTIVE :

Be among the lowest cost producers in the world. Be the dominant player in the selected market. Focus on products having high growth and high returns. Produce steel products of the international quality. Sustainable growth. Divest, merge, acquire. Encourage innovation. Ensure safety and environment sustainability. Enthusiastic and happy employees. Improve the quality of life of the communities we serve.

T HE FINANCE AND ACCOUNTS DEPARTMENT

The Accounts department of TATA STEEL was established with the objective of

recording of financial transaction and meeting the statutory requirement. With

the change in time, requirements & perception, it has evolved itself into FINANCE

& ACCOUNTS division with a vision to becoming a business partner and aid the

top management in running business, moving from transaction processor to

financial analysts. Composition of professionals Finance & Accounts division

integrated its man power requirement with that of TATA STEEL. The companysinitiatives to attract and retain the best talents also form part of the division.

Finance and accounts division has 152 professionals, having one or more

qualifications, which add up to 74 chartered

Accountants and 6 company secretaries and 20 other professionals.

Technical up gradation office automation as a part of modern day initiatives has

also been studied and is in the advanced stag of implementation in the division.



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Some of the major technologies, facilities & equipment implemented during the

year in the division include:

1. Fully Integrated SAP R3 system, wherein the transactional data is enteredin the respective parent department. Thus avoidance of double data entryin the division.

2. LAN connectivity throughout the division & e- mail IDs to the entireofficers facilitating easy communication. Also available is round the clockinternet facility to all the officers for gathering & sharing information.

3. Office automation in the area of data dissemination & document storage isalso coming to the division in big way in the near future.

4. Revamping of Intranet site of F&A in the progress to enrich & update theemployees with latest updates.

Functions of the department:

Functions performed by the division and the reports provided to the top

management include:

Monthly profit statement. Monthly, quarterly & annual reports. Decision support system

Payment of salaries, wages & other dues to employees. Cost & inventory reports. Payment of dues & compliance to employees. Inter-company comparisons. Payment to vendors. Various analysis. Evaluation of business projects.

Groups and sections of finance and accounts department:



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The whole finance and accounts department of Jamshedpur is divided in different

groups and sections. These are:

1) Cash Office2) Finance and Cost3) Payroll Accounts4) Purchase and Capital Group5) Sales and Indirect Taxation

Sales and direct taxation group is responsible for accounting. It is also related to

post sales activities like debtors & town accounting. It comprises of the following

section:

Exercise section

Freight section Town Debtors section Sundry Debtors section



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R E S E A R C HM E T H O L O G Y

SCOPE OF THE PROJECT:

The whole project has been made by collecting data through primary and secondary sources .Primarysource stands for that information i.e. collected by direct queries to concern.

1) To carry out a critical analysis of the TATA STEEL Ltd. Working capitalmanagement.

2) To find out the area of the weakness in the existing working capital controlmechanism.

3) To extrapolate the company s position with the steel industry.



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RESEARCH DESIGN :

The study will be based on the based on the descriptive and applied research.The efficiency and efficacy of the working capital management model of the

TATA STEEL Ltd.The accounting as well as the planning of the working capital

needs a thorough study. By ratio analysis and trend analysis the result of the

control mechanism can be summarized which will help in identifying the

effectiveness of the system under the preview. Hence the ratio and the trend

analysis will be used to arrive at the conclusion.

W ORKING CAPITAL MANAGEMENT

INRTODUCTION:

Working Capital means current asstes. A Firm need money to pay for their day to

day expenses that is, salaries,bills,suppliers etc. Managing the working capital

needs, of the organization is very important because of shortage of fund may

damage the day to day operation whereas holding of excess of fund may

interrupt its profit.

The term working capital has been originated with the old Yankee Peddle. There

are two concepts of working capital:- Gross Working Capital and Net working

capital. Gross Working Capital means current assets that is inventory, debtors,

loan and Advances, cash and bank balance etc. Net Working Capital means

current assets and current liabilities.

Working Capital Management involves the administration within policy guidelines

of current assets and current liabilities. The working capital management will help



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the Finance Manager to decide what quantities of cash, other liquid assets,

accounts receivables and inventories the firm will held at any point of time.

The goal of working capital management is to manage the firms current assets

and current liabilities in such a way that a satisfactory level of working capital is

maintained.

Definition :

Working capital management is concerned with the problems that arise in

attempting to manage the current assets, the current liabilities and the

interrelationship that exists between them.

Current assets

It refers to those assets, which in the ordinary course of business can be, or will be, converted into cashwithin one year without undergoing a diminution in value and without disrupting the operations of thefirm.

Example: Cash, marketable securities, accounts receivable and inventory are the major current assets.

Current liabilities

These are those liabilities that are intended, at their inception, to be paid in the ordinary course ofbusiness, within a year, out of current assets or earnings of the concern.

Example: accounts payable, bills payable, bank overdraft and outstanding expenses are the major

current liabilities.

FORMULA ofWORKING CAPITAL :

Working Capital = Current Asset Current Liability

Collection Of Data (Data Information Sources) :

Data will be collected from both the primary and secondary sources:

PRIMARY SOURCE OF DATA:

Observation method

Direct Interview Method

Indirect Method

Department Visit: comprises of discussion with concerned person and interviewing few officers in the account and finance sector.

SECONDARY SOURCE OF DATA :



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Annual Report

Journal and Books

Study of files and office documents

Different records by the Accounts and Bills Sections

Websites of TATA STEEL Ltd.

DATA ANALYSIS OF

TATA STEEL



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NET WORKING CAPITAL

CURRENT ASSETS 2007-08 2008-09 2009-10

stores and spares 557.67 612.19 623.76

stock in trade 2,047.31 2,868.28 2,453.99

sundry debtors 543.48 635.98 434.83

interest accrued on investment 0.2 0 0.29

cash and bank balances 465.04 1,590.60 3,234.14

loans and advances 1,972.20 4,142.93 3,126.49

TOTAL (A) 5,585.90 9,849.98 9,873.50

CURRENT LIABILITIES

sundry creditors 3,243.42 3,842.78 4,086.65

subsidiary companies 115.74 1,358.12 1,514.30

interest accrued but not due 231.05 506.68 676.66

advances received from thecustomers

226.03 297.37 334.99

liability towards investorseducation and protection fund

39.02 34.91 40.49

provision for retiring gratuities 0 0 0

provision for employee benefits 848.54 1,143.08 1,127.50

provision for taxation 854.74 493.59 507.13



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provision for fringe benefits 19.12 19.12 2.12

proposed dividend 1,191.12 1,278.40 709.77

TOTAL (B) 6,768.78 8,974.05 8,999.61

NET WORKING CAPITAL (A-B) -1,182.88 875.93 873.89

(Figures are in Rs. Crores)

Net Working Capital = Current Assets-Current Liabilities

*Note : Those amount which is shown in the bracket, define as a Negative Value.

Graph showing Current Assets, Current Liabilities and Net Working Capital

PERCENTAGE CHANGE IN WORKING CAPITAL

CURRENT ASSETS 2007-08 2008-09 2009-10

Stores And Spares 10.33 9.78 1.89

Stock In Trade 12.03 40.10 (14.44)

Sundry Debtors (13.96) 17.02 (31.63)



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Cash And Bank Balances 2.11 242.04 103.33

Loans And Advances (26.39) 110.07 (24.53)

TOTAL (A) (8.42) 76.34 0.24

CURRENT LIABILITIES

Sundry Creditors 3.10 18.48 6.35

Su1bsidiary Companies 12.80 1,073.42 11.50

Interest Accrued But Not Due 390.45 119.29 33.55

Advances Received From The

Customers

14.00 31.56 12.65

Liability Towards Investors Education

And Protection Fund

33.58 (10.53) 15.98

Provision For Retiring Gratuities (100) 0.00 0.00

Provision For Employee Benefits 80.47 34.71 (1.36)

Provision For Taxation 90.50 (42.25) 2.74

Provision For Fringe Benefits 4.08 0.00 (88.91)

Proposed Dividend 26.19 7.33 (44.48)

TOTAL (B) (283.

19)

(174.05) (0.24)

Interpretation

In 2009-10, net working capital increased by 202.48% compared to previous year. It is because of

increase in cash and bank balances and loans and advances in current assets side. But there is no

significant increase in current liability side. Also Tata steel reduced the proposed dividend to Rs.

709.77 Cr. from Rs. 1,278.40 Cr. of Previous Year.

During FY 10, inventory decreased by 14% compared to FY 09. Purchase of finished and semi-

finished products was much lower compared to previous year as requirements of Agrico and Wires

Division were fully met from steel works in the FY 10 as against partial purchases from outside



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suppliers/imports in the previous year. Non purchase of sponge iron also contributed to lower value of

purchase of finished and semi-finished products.

While the stock of stores and spares as on 31st March, 2010 remained almost at the same level as on

31st March, 2009, the inventories of finished, semi-finished goods, scrap and raw materials was lower

by 14% than that of last year. The raw materials inventory was also lower due to lower prices of coal

and coke along with lower volume of coke. The raw material Stocks in The Companys Ferro Alloys

& Minerals division was also lower than the last year level.

Debtors as on 31st March, 2010 was lower by 32% as compared to 31st March, 2009 primarily due to

stringent credit control measures and lower exports.

The increase of Rs. 939 cr. in loans and advances represents increase in advance against equity (to

Centennial Steel) and advances to subsidiary companies (to Tata Steel KZN) partly offset by reduction

in the amount receivable against forward covers.

FINANCIAL RATIOS

Working Capital Turnover Ratio:

Ratio that shows the number of times the working capital is converted into revenue in an

accounting period, or how efficiently the management is using its working capital to generate

sales Revenue.

Working Capital Turnover Ratio = Net Sales / Net Working Capital.

PARTICULARS 2007-08 2008-09 2009-10



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NET SALES 19,693.28 24,315.77 25,021.98

NET WORKING CAPITAL (1182.88) 875.95 873.89

WORKING CAPITAL TURNOVER

RATIO

(16.65) 27.76 28.63

Interpretation

Working capital turnover ratio has been decreased to 28.63 times in 2009-10 compared to 27.76 in

2008-09. Decrease in working capital turnover is because of the increase in net working capital. The

reason for increase in net working capital is the increase in cash and bank balances and loans and

advances.

Reduction in working capital turnover is not a good sign. Tata Steel has a huge increase in working

capital turnover in 2008-09 but could not keep the momentum to FY 10.

C U R R E N T R A T I O :A liquidity ratio that measures a company ability to pay Short term obligations .

Current Ratio = Current Assets/Current Liabilities

PARTICULARS 2007-08 2008-09 2009-10

CURRENT ASSETS 5585.90 9,850 9,873.5

CURRENT LIABILITIES 6,768.78 8,974.05 8,999.61

Current Ratio 0.83 1.098 1.097

Interpretation :



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The Financial position is supposed to be very sound if the current ratio is more than 2:1 . In 2006 to

2007 Tata steel has improved its financial soundness as the current ratio is 1.18 which is higher as

compared to previous years.

QUICK RATIO :

An indicator of a company Short term liquidity . The quick ratio measures a companys ability

to meet its Short term obligations with its most liquid assets. The higher the Quick Ratio, the

better the position of the company.

Quick Ratio = (Current Assets - Inventory) / Current Liability

Interpretation :

Higher the ratio the better is the capacity of business to meet its current obligations . In 2009 to 2010

the liquid ratio of tata steel is 0.82 which is aprox to standard 1:1 .


PARTICULARS 2007-08 2008-09 2009-10

CURRENT ASSETS 5585.90 9,850 9873.5

STOCK IN TRADE 2,047.31 2,868.28 2,453.99


QUICK RATIO 0.52 0.78 0.82


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STOCK TURNOVER RATIO :

A ratio showing how many times a company inventory is sold or replaced over a period.

Stock Turnover Ratio = Cost of Goods Sold / Average Stock

Average Stock = Opening Stock +Closing Stock /2

PARTICULARS 2007-08 2008-09 2009-10

COST OF GOODS SOLD 13,183.05 18759.7 17140.09

AVERAGE STOCK 1,937.43 2,457.80 2,661.14

STOCK TURNOVER RATIO 6.80 7.63 6.44

Interpretation :

Stock turnover ratio evaluates the efficiency of the firm in managing its inventory. This ratio indicates

the number of times inventory has been converted into sales during the year. Tata Steel shows a

constant increase in stock turnover till 2008-09. Stock turnover of 7.63 is good in terms of liquidity. It

shows the efficient management of inventory. Turnover of 6.44 times in 2009-10 is also a good value

as it is above 6, but it is less than 7.63 .

There is an adequate internal control system commensurate with the size of the Company and the

nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and

services. During the course of our audit, any major weakness has not been observed in such internal

control system.

DEBTOR TURNOVER RATIO :-



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Debtor turnover ratio indicates the velocity of debt collection of firm. In simple words it

indicates the number of times average debtors ( Receivable ) are turned over during year .

Debtor Turnover Ratio = Net Sales / Average Debtors

Average Debtor = Opening Debtor +Closing Debtor / 2

PARTICULARS 2007-08 2008-09 2009-10

NET SALES 19,693.28 24,315.77 25,021.98

AVERAGE DEBTORS 587.56 589.73 535.41

DEBTOR TURNOVER RATIO 33.52 41.23 46.73

Interpretation:-

Debtor turnover ratio indicates the time lag between credit sales and cash collection period. Debtor

turnover ratio of 46.73 times in 2009-10 means Tata Steel collects the cash immediately after giving

the delivery i.e., 7.8 days after the sales on an average. It is a marvelous turnover many companies

dreaming to achieve. It increases the cash balance of the company and keeps the liquidity. Another fact

is, debtor turnover ratio is increasing continuously last 5 years. It is an indication of stringent

collection methods followed by Tata Steel. Also, they keep only a small portion that is around 4% as

provision for bad debts.

CREDITORS TURNOVER RATIO :

A short term liquidity measures used to quantify the rate at which a company pays off its

suppliers . Accountsc Creditors turnover ratio is calculated by taking total purchase made from

suppliers and dividing it by the average account payable amount during the same period.

Creditors Turnover Ratio = Net Credit Purchase / Average Creditors

Average Creditor = Opening creditor +Closing creditor / 2

PARTICULARS 2007-08 2008-09 2009-10

NET CREDIT PURCHASE 5,394.29 8,110.97 8,521.25

AVERAGE CREDITORS 2,996.20 4,349.37 5,614.85



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CREDITOR TURNOVER RATIO 1.8 1.86 1.52

(Note*- All purchases are assumed as credit purchase. Iron ore is excluded as it is obtained from

captive mines)

Interpretation :

Payables turnover ratio of Tata Steel is an exceptional case. It is just slightly greater than two times.

This shows that they pay creditors only two times in a year. They manage this turnover for last five

years. It helps them to keep the cash with them for a long period and it can be used for other activities.

The study understands the liquidity strength of Tata Steel when the payables turnover is read along

with debtor turnover. Debtor turnover is around 40 times in a year and payables turnover is only two

times! It clearly shows the competitive advantage Tata Steel has over its suppliers and customers.

OPERATING CYCLE

Gross Operating Cycle (GOC) = RMCP + WIPCP + FGCP + DCP

Net Operating Cycle (NOC) = GOC - CDP

ITEMS 2007-08 2008-09 2009-10

Raw material Conversion PeriodRaw material consumption 3,429.52 5,709.91 5,494.74

Raw material consumption per day 9.40 15.64 15.05

Avg.Raw material inventory 811.04 1,167.41 1293.6

RMCP ( Raw Material Conversion Period)

86.32 74.63 85.93

Work in Progress

Cost of production 11,354.75 15,466.33 15,919.77

Cost of process per day 31.11 42.37 43.62

Avg.Work in progress inventory 50.21 72.33 115.91

WIPHP ( Work in Progress ConversionPeriod )

1.61 1.71 2.66

Finished Goods

Cost of goods sold 12,479.85 16,499.39 17,479.18

Cost of goods sold per day 34.19 45.20 47.89

Avg.Finished goods inventory 1,076.18 1,218.06 1,251.63

FGCP ( Finished goods ConversionPeriod )

31.48 26.95 26.14



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Collection Period

Credit sales at cost 19,693.28 24,315.77 25,021.98

Sales per day 53.95 66.619 68.55

Avg.Debtors 587.56 589.73 535.41

DCP ( Debtor Collection Period ) 10.89 8.85 7.81

Creditors Deferral PeriodCredit Purchase 6277.27 9024.20 8714.39

Purchase Per Day 17.198 24.72 23.86

Avg. Creditors 3,655.12 4,910.60

6,312.24

CDP ( Creditor Deferral Period ) 212.53 198.62 264.39

GROSS OPERATING CYCLE 130.30 112.13 122.53

NET WORKING CYCLE (82.23) (86.49) (141.85)

Interpretation

From 2008-09, Tata Steel has been reducing the Raw Material Holding Period. It is a clear

indication of efficiency of inventory management techniques Tata Steel follows. RMHP was

reduced from 185 days in 2007-08 to 145 days in 2008-09.

Work in Progress Holding Period (WIPHP) is maintained below 2 days till 2008-09 which is

very good. This shows that there were no stoppages in the production process. Increase in

WIPHP in 2009-10 is because of the increase in work in progress.

Finished Goods Holding Period (FGHP) has been reducing constantly from FY 2006 to 2010.

It is achieved by efficient supply chain management and good relationship with customers and

dealers.

Debtors Collection Period is also decreasing and it has come down to 7.81 days in FY 2010. It

shows the prompt collection policy of Tata Steel from its customers.

Creditors Deferral Period is at 170 days during FY 2010 which implies that company pays the

creditors after 170 days of the purchase. The overall creditors value is Rs 8,521.25 crores

while the purchase per day has also increased to Rs. 23.35 crores.

Net Operating Cycle (NOC) is coming down to 14 days for the past five years. It is because of

the increase in Creditors Deferral Period. Its a positive signal for the company because it

implies

that the cash is available for other uses such as investing in new capital, spending on

equipments and infrastructure, as well as preparing for possible share buybacks down the road.



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production.

Cost of Process per day The value of cost of process per day is

calculated by dividing cost of production by

365 days.

Works In Progress Inventory The opening and closing value of work in

progress inventory is taken from schedule G of

the balance sheet. The schedule G contains the

breakup of entire inventory. The last year

closing balance is considered as opening ofcurrent year and average is Calculated.

Work in Progress Holding Days Holding days are calculated by dividing work

in progress inventory by cost of process per

day.

Finished Goods :-

Cost of Goods Sold The value of cost of goods sold is calculated by

subtracting profit before taxation from net

sales. The net sale is taken from profit and loss

account as well as profit before taxation. Then

the result is calculated.

Cost of Goods Sold Per Day The value is calculated by dividing cost of

goods sold by 365 days.

Finished Goods Inventory The opening and closing value of finished

goods inventory is taken from schedule G of

the balance sheet . The schedule G contain thebreak up of entire inventories . The last year

closing balance is consider as opening for

current year and average is calculated .

Finished Goods Holding Days The value is calculated by dividing finished

goods sold per day.



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C ollection Period :

Credit Sales The value of entire net sales from profit and

loss account is taken as credit sales for

particular year . The entire net sales is

consider as credit sales .

Sales Per Day The value is calculated by dividing the entire

credit sales by 365 .

Debtor The value of debtor is taken from balance

sheet . Debtor comes under the head of current

asset in the balance sheet .

Debtor Outstanding Days The value of outstanding days is calculated by

dividing debtors by sales per day .

Creditor Deferral Period :

Credit Purchase For the year 2008 2009 no purchase is shown

. Therefore we have calculated the percentage

from raw material consumed and then the

entire calculation is done .

Purchase Per Day The value is calculated by dividing the entire

credit purchase by 365 days .

Creditors The value of creditor is taken from theschedule of current liabilities and provision .

Creditors Deferral Period The value of deferral period is calculated by

dividing by purchase per day .



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DATA ANALYSIS OF

JSW STEEL



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NET WORKING CAPITAL

CURRENT ASSETS 2007-08 2008-09 2009-10

Inventories 1,549.16 2,051.42 2,585.77

Sundry Debtors 337.39 398.14 563.25

Cash and Bank Balances 339.22 419.96 287.11

Loans and Advances 842.15 1,744.88 2,123.39

Other Current Assets 18.62 17.24 0.00

TOTAL (A) 3,086.54 4,631.64 5,559.52

CURRENT LIABILITIES

Acceptances 2,060.26 5,293.09 5,047.75

Sundry Creditors 1,295.72 1,652.17 1,655.58

Rents and Other Deposits 20.46 43.43 58.65

Advances from the Customers 74.83 164.29 180.38

Interest accrued but not due on

loans

142.45 65.14 76.20

Other Liabilities 56.70 51.67 53.31

Premium payable on

redemption

of FCCBs & Preference Shares

72.30 188.16 268.21

Investor Education and

Protection Fund

15.94 18.33 17.59

Provision for Income Tax 0.00 0.00 0.00

Provision for Wealth Tax 0.55 0.40 0.00

Provision for Fringe Benefits 0.80 0.95 0.00

Provision for Employee Benefits 21.99 23.77 24.48

Proposed Dividend on

Preference Shares

29.06 28.99 27.90

Proposed Dividend on Equity

Shares

261.87 18.71 177.70

Corporate Dividend Tax 49.44 8.11 34.14



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Tax on Equity Preference

Dividend

0.00 0.00 0.00

Provision for Leave Encashment 0.00 0.00 0.00

TOTAL (B) 4,102.37 7,557.21 7,621.89

NET WORKING CAPITAL (A-B) (1,015.83) (2,925.57) (2,062.37)

(All the figures are in Rs. Cr)

NOTE: - Those amount which is shown in the bracket, define as a Negative Value.


P ERCENTAGE CHANGE IN WORKING CAPITAL

CURRENT ASSETS 2007-08 2008-09 2009-10

Inventories 53.18 32.42 26.05

Sundry Debtors 37.62 18.01 41.47

Cash and Bank Balances 0.42 23.80 (31.63)

Loans and Advances 53.32 107.19 21.69

Other Current Assets (94.56) (7.41) (100.00)

TOTAL (A) 24.18 50.06 20.03

CURRENT LIABILITIES

Acceptances 39.40 156.91 (4.64)


Rents and Other Deposits 0.00 112.27 35.04

Advances from the Customers 84.86 119.55 9.79

Interest accrued but not due on

loans

0.14 (54.27) 16.98

Other Liabilities 100.64 (8.87) 3.17

Premium payable on redemption

of FCCBs & Preference Shares

0.00 160.25 42.54

Investor Education and Protection

Fund

30.98 14.99 (4.04)



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CU RR EN T R AT IO :A liquidity ratio that measures a companys ability to pay Short term obligations .

Current Ratio = Current Assets / Current Liabilities

Particulars 2007-08 2008-09 2009-10

CURRENT ASSETS 3,086.54 4,631.64 5,559.52


CURRENT RATIO 0.75 0.61 0.73

Interpretation :

The interpretations given for working capital turnover ratio suit current ratio also. Because of the

negativity of net working capital, current ratio falls below one. Standard value for current ratio is 2 and

JSW has to take the initiatives to increase the current ratio. Increase in current liabilities is because of

increase in acceptances from subsidiary companies and customers as part of expansion projects.

QUICK RATIO:

An indicator of a companys Short term liquidity . The quick ratio measures a companys ability

to meet its Short term obligations with its most liquid assets . The higher the Quick Ratio, the

better the position of the company .



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Quick Ratio = (Current Assets Inventories) / Current Liabilities

PARTICULARS 2007-08 2008-09 2009-10

CURRENT ASSETS 3,086.54 4,631.64 5,559.52

INVENTORIES 1,549.16 2,051.42 2,585.77


QUICK RATIO 0.37 0.34 0.39

Interpretation

The quick ratio has decreased over the last 5 years due to considerable increase in Current Liabilities

which increased on account of increase in acceptances.

STOCK TURNOVER RATIO :

A ratio showing how many times a company inventory is sold or replaced over a period


Average Stock =Opening stock +Closing stock / 2

PARTICULARS 2007-08 2008-09 2009-10

COST OF GOODS SOLD 9,193.02 12,793.05 15,915.67

AVERAGE STOCK 1,280.26 1,800.29 2,318.60




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Interpretation:

Stock turnover ratio of JSW Steel is showing a steady trend at 7. In spite of the increase in inventory

from Rs. 1280 Cr in FY 2007 to Rs. 2318 Cr in FY 2010, they could manage the inventory turnover.

Inventories were physically verified during the year by the management at reasonable intervals, exceptfor inventories lying with third parties where confirmations have been received. As the Companys

inventory of raw materials mostly comprises bulk materials such as coal, coke, pellets etc. requiring

technical expertise for establishing the quality and the quantification thereof, the Company has hired

independent agencies for physical verification of such stocks. The procedures of physical verification

of inventory followed by the management are reasonable and adequate in relation to the size of the

Company and the nature of its business. The Company has maintained proper records of its inventories

and no material discrepancies were noticed on physical verification.

DEBTOR TURNOVER RATIO:

Debtor turnover ratio indicates the velocity of debt collection of firm. In simple words it

indicates the number of times average debtors (Receivable) are turned over during year.

Debtor Turnover Ratio = Net Sales / Average Debtors

Average Debtor = Opening Debtor +Closing Debtor /2

PARTICULARS 2007-08 2008-09 2009-10

NET SALES 11,420.00 14,001.25 18,202.48

AVERAGE DEBTORS 291.28 367.77 480.70

DEBTOR TURNOVER RATIO 39.21 38.07 37.87

Interpretation :



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Debtor turnover ratio has shown a steady trend over the last 3 years which shows the companys

efficient policy of collection from customers. At the same time, companys sales and average debtors

have increased drastically. It is a good indicator of companys capacity to increase the sales without

compromising on its collection policies.

PAYABLES TURNOVER RATIO:

A short term liquidity measures used to quantify the rate at which a company pays off its

suppliers . Accounts payable turnover ratio is calculated by taking total purchase made from

suppliers and dividing it by the average account payable amount during the same period .

Payables Turnover Ratio = Net Credit Purchase / Average Creditors

Average Creditor = Opening Creditor +Closing Creditor / 2

PARTICULARS 2007-08 2008-09 2009-10

NET CREDIT PURCHASE 6,495.21 9,381.51 11,386.28

AVERAGE CREDITORS 867.89 1,426.58 1,643.39

PAYABLES TURNOVER RATIO 7.48 6.58 6.93

Interpretation :

JSW Steels payables turnover ratio is high as compared industry ratio. During 2008-09 it has come

down to 6.58 which again increased to 6.93. It is mandatory to keep the payables turnover ratio aslower as possible as it will increase the availability of cash for day to day activities. The fact JSW has

a negative working capital for last three years has to be read along with its high payables turnover ratio

which will again reduce its liquidity.



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O PERATING CYCLE

Gross Operating Cycle (GOC) = RMCP + WIPCP + FGCP + DCP

Net Operating Cycle (NOC)= GOC CDP

ITEMS 2007-08 2008-09 2009-10

Raw Material Conversion Period

Raw material consumption 1330.32 2672.05 2225.71

Raw material consumption per day 3.64 7.32 6.1

Raw material inventory 354.8 500.12 613.08

RMCP 97.35 68.32 100.54

Work In Progress

Cost of production 4297.41 5886.26 5915.58

Cost of process per day 11.77 16.13 16.21

Work in progress inventory 50.95 62.2 90.55

WIPCP 4.33 3.86 5.59

Finished Goods

Cost of goods sold 3748.77 6148.4 6085.02

Cost of goods sold per day 10.27 16.84 16.67

Finished goods inventory 405.52 532.72 565.38

FGCP 39.48 31.62 33.91

Collection Period

Credit Sales at Cost 5410.75 7653.19 7367.59

Sales Per Day 14.82 20.97 20.19

Debtors 303.85 339.42 506.91

DCP 20.5 16.19 25.11

Creditors Deferral Period

Credit Purchase 1596.86 2959.72 3194.1

Purchase Per day 4.37 8.11 8.75



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Creditors 880.33 4094.54 2512.79

CDP 201.22 504.95 287.14

GROSS OPERATING CYCLE 161.65 119.99 165.15

NET WORKING CYCLE (39.57) -384.96 -121.99

(Note*: Finished goods of 2008-09 excludes Rs. 101.41 Cr which arising out of trial run

production.)

Interpretation :

Because of increase in raw material consumption per day, Raw Material Holding Period

(RMHP) has come down to 79 days during FY 2010 from 96 days in FY 2006. It indicates

company applies new inventory management techniques to efficiently utilize its inventory and

reduce the stock of inventory.

Work in Progress Holding Period (WIPHP) is only three days during 2009-10 which is a good

number. But it has increased in last three consecutive years. At the same time they reduce

RMHP, they are not able to reduce WIPHP. The company has to implement some techniques to

reduce WIPHP as they do for raw material.

Finished Goods Holding Period (FGHP) is increasing constantly from FY 2006. It is 16 days

for FY 2010 which is very less and good. It is shown in the profit and loss accounts that the

sales is increasing in every year. Increase in FGHP may be because of increase in sales. If they

can increase sales without increasing finished goods, it would be appreciable.

Debtors Collection Period (DCP) stands at 9 days for last three years which is a good number.

It means that the company gets the payment within 9 days of the credit sales to customers. This

satisfies the liquidity requirements of the company. In spite of the increase in sales, they could

maintain DCP. It shows companys efficient collection policy and its business relationship with

customers.

Creditors Deferral Period (CDP) stands around 50 days for last five years. Even though the

credit purchase has increased in these years, there is no increase in CDP. The company shouldtry to increase CDP as its purchases are increasing. It will increase the availability of cash for

working capital.

During FY 2010, Net Operating Cycle (NOC) has increased to 57 days from 47 days during FY

2009. It is because of decrease in CDP. So the company should increase CDP to reduce NOC.



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D A T A A N A L Y S ISO F S A IL



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NET WORKING CAPITAL

CURRENT ASSETS 2007-08 2008-09 2009-10

Inventories 6,857.23 10,121.45 9,027.46

Sundry Debtors 3,048.12 3,024.36 3,493.90

Cash & Bank Balances 13,759.44 18,228.53 22,436.37

Interest Received / Accrued 273.08 1,014.47 780.34

Loans 372.67 434.34 472.19

Claims Recoverable 779.26 860.70 1,450.84

Contractors & Suppliers 158.99 102.87 104.67

Income Tax Paid in Advance /

Recoverable

11.62 67.07 140.84

Export Incentive Receivable 58.56 16.27 41.00

Others 464.16 394.60 433.52

Deposits 534.49 246.21 700.03

TOTAL (A) 26,317.62 34,510.87 39,081.16

CURRENT LIABILITIES

Sundry Creditors 2,985.24 4,156.77 6,232.36

Advances 643.49 565.64 699.28

Security Deposits 243.09 431.20 517.08

Interest Accrued but not due 115.64 95.58 401.12

Liability Towards Investor Education

and Protection Fund

8.89 10.03 11.00

Other Liabilities 2,404.57 2,454.17 3,076.02

PROVISIONS for Gratuity 718.16 573.17 89.26

Accrued Leave 1,346.70 1,602.08 1,979.71



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Taxation 38.18 364.01 2.71

Pollution and Peripheral Development 89.05 99.73 112.92

Exchange Fluctuation 0.00 0.00 16.43

Proposed Dividend 743.47 536.95 702.17

Tax on Dividend 125.54 91.26 116.62

Employee Benefits 872.21 1,070.18 1,276.72

Wage Revision 2,459.66 4,552.94 1,243.22

Mines Closure / Afforestation 351.05 467.29 607.01

Others 53.81 50.60 64.90

TOTAL (B) 13,198.75 17,121.60 17,148.53

NET WORKING CAPITAL (A-B) 13,118.87 17,389.27 21,932.63

(All Figures are in Rs. Cr)


Interpretation

The graph clearly indicates that the Current Assets of SAIL has increased over the last five years

following a linear trend. The Current Liabilities has also increased but the rate of increase of Current

TLiabilities is less than the increase in Current Assets. Net Working Capital also has increased

consistently over the last five years.

2009-10

During this year inventory has been decreased by 10% compared to previous year. The inventories

decreased mainly on account of reduction in semi/finished inventory by Rs.1157 crore and stores &

spares inventory by Rs.22 crore. However, there was increase in raw material inventoryby Rs.46

crore.The decrease in finished/semi-finished inventories by 20% was dueto decrease in quantity and

valuation rate on account of reduction inboth cost of production or Net Sales Realisation.The stores &

spares inventory was reduced by 1% and raw materialinventory had increased marginally by 2%.

Increase in current liabilities by Rs.3248 crore was mainly on account of increase in sundry creditors

for capital works, advances from customers, security deposits etc. The provisions were decreased by

Rs.3239 crore mainly on account of decrease in provision for gratuity, taxation and wage revision.



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2008-09

The inventoryhas increased by 47%. Inventories increased mainly on account of increase in

semi/finished inventory by Rs.1,873 crore, raw material inventory by Rs.1,183 crore and stores &

spares inventory by Rs.209 crore. Increase in finished/semi-finished inventories was due to increase in

quantity and valuation rate on account of increase in cost of production and Net Sales Realisation.

Also, the sudden meltdown of world economy during the middle of the year resulted in lower sales and

accumulation of stocks. Increase in stores & spares inventory was partly due to price escalations and

partly due to procurement for major repairs to be carried out in various plants.

Despite increase in sales turnover, there was marginal reduction in net debtors.

Loans and Advances reduced by Rs.258 crore. The reduction was mainly on account of decrease in

advances recoverable from contractors and suppliers, employees, deposits with port trust, excise

authorities, railways, etc.

Increase in current liabilities by Rs.1,312 crore was mainly on account of increase in sundry creditors

for capital works, security deposits etc. The provisions were increased by Rs.2,610 crore mainly onaccountof increase in provision for accrued leave, taxation, wage revision.

2007-08

The inventory has increased by 3% this year. The increase in inventory of finished/semi-finished

products by 12% was on account of valuation at increased cost of production. However, in terms of

number of days of turnover, the inventory of finished/semi-finished products reduced to 32 days as on

31.03.2008 against 33 days as on 31.03.2007. Increase in stores & spares inventory by 10% was due to

price escalations and procurement for major repairs to be carried out in various plants. In terms of

number of days, stores and spares inventory was almost at the same level of 31.03.2007. Raw

materials

inventory was at 37 days consumption as on 31.03.2008 as against 49 days consumption as on

31.03.2007. The increase of Rs. 733 crore in net debtors was mainly on account of increase in

turnover.

In terms of number of days of turnover, the debtors increased from 22 days as on 31.03.2007 to 24

days as on 31.03.2008.

Increase in current liabilities by Rs 1003 crore were mainly on account of increased level of

operations and employees related year-end dues. While there were increase in Provisions on account

of mines afforestation / restoration / closure costs, wage revision, dividend and tax on dividend; overall

increase was marginal due to reduction in provision for gratuity on account of transfer of Rs. 1250

crore to a separate Gratuity Fund constituted during the previous year.



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P ERCENTAGE CHANGE IN WORKING CAPITAL

CURRENT ASSETS 2007-08 2008-09 2009-10

Inventories 3.09 47.60 (10.81)

Sundry Debtors 31.68 (0.78) 15.53

Cash & Bank Balances 43.18 32.48 23.08

Interest Received / Accrued 79.00 271.49 (23.08)

Loans 21.46 16.55 8.71

Claims Recoverable 24.98 10.45 68.57

Contractors & Suppliers 36.40 (35.30) 1.75

Income Tax Paid in Advance / Recoverable 10.67 477.19 109.99

Export Incentive Receivable (45.31) (72.22) 152.00

Others 32.26 (14.99) 9.86

Deposits 297.10 (53.94) 184.32

TOTAL (A) 29.14 31.13 13.24

CURRENT LIABILITIES


Advances 1.87 (12.10) 23.63

Security Deposits (5.69) 77.38 19.92

Interest Accrued but not due (41.83) (17.35) 319.67

Liability Towards Investor Education and

Protection Fund

19.65 12.82 9.67

Other Liabilities 36.82 2.06 25.34

PROVISIONS Gratuity (58.20) (20.19) (84.43)



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Accrued Leave (1.80) 18.96 23.57

Taxation (13.85) 853.40 (99.26)

Pollution and Peripheral Development 7.15 11.99 13.23

Proposed Dividend 20.00 (27.78) 30.77

Tax on Dividend 19.23 (27.31) 27.79

Employee Benefits 9.69 22.70 19.30

Wage Revision 379.86 85.10 (72.69)

Mines Closure / Afforestation 56.75 33.11 29.90

Others (30.25) (5.97) 28.26

TOTAL (B) 20.55 29.72 0.16

NET WORKING CAPITAL (A-B) 39.12 32.55 26.13

FINANCIAL RATIOS

Working Capital Turnover Ratio :

Ratio that shows the number of times the working capital is converted into revenue in an

accounting period , or how efficiently the management is using its working capital to generatesales revenue .

Working Capital Turnover Ratio = Net Sales / Net Working Capital

PARTICULARS 2007-08 2008-09 2009-10

NET SALES 39,508.45 43,150.08 40,551.38

NET WORKING CAPITAL 13,118.87 17,389.27 21,932.63

WORKING CAPITAL TURNOVER RATIO 3.01 2.48 1.85

Interpretation :

The graph clearly indicates that the working capital turnover ratio has decreased over the last five

years. This means that the firm is not being efficient in employing its working capital. This is due to

the drastic increase in net working capital which is a result of increase in current assets. It is an



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indication that the company is not utilizing its current assets in an efficient manner. There is also a

piling up of cash and bank balanced which again shows company is not using its cash.

CURRENT RATIO:

A liquidity ratio that measures a companys ability to pay Short term obligations .

Current Ratio = Current Assets / Current Liabilities

PARTICULARS 2007-08 2008-09 2009-10

CURRENT ASSETS 26,317.62 34,510.87 39,081.16


CURRENT RATIO 1.99 2.02 2.28

Interpretation :

The interpretations given for working capital turnover ratio suit current ratio also. Because of the

negativity of net working capital, current ratio falls below one. Standard value for current ratio is 2 and

in 2008 to 2009 SAIL is meeting with standard level of 2 , so it is favourable for company but in 2009

to 2010 the ratio is increasing more than standard level to 2.28 so company may face problem to meet

its obligations .

QUICK RATIO:



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An indicator of a companys Short term liquidity . The quick ratio measures a companys ability

to meet its Short term obligations with its most liquid assets . The higher the Quick Ratio, the

better the position of the company .

Quick Ratio = (Current Assets Inventories) / Current Liabilities

Interpretation :

Quick ratio is also higher as net working capital is high. Interpretations for current ratio apply for

quick ratio also. Quick ratio has increased to 1.75 during 2009-10 from 1.42 during 2008-09. It is

observed that company is in position to meet its obligations .

Higher the ratio the better is the capacity of business to meet its current obligations

STOCK TURNOVER RATIO:

A ratio showing how many times a company inventory is sold or replacedover a period .


Average Stock = Opening Stock +Closing Stock / 2

PARTICULARS 2007-08 2008-09 2009-10

COST OF GOODS SOLD 32,255.69 38,779.34 35,764.07


PARTICULARS 2007-08 2008-09 2009-10

CURRENT ASSETS 26,317.62 34,510.87 39,081.16

INVENTORIES 6,857.23 10,121.45 9,027.46


QUICK RATIO 1.47 1.42 1.75


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AVERAGE STOCK 6,754.35 8,489.34 9,594.33


Interpretation

Stock turnover ratio of SAIL is very less. It was around 4.5 times during the period of 2005-06 to

2008-09. During 2009-10,

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